Saturday, October 11, 2008

No Safe Havens, but Plenty of Bargains...if you have the Stomach for it....

How do you describe the markets the past two weeks? Did it feel like 1987 all over again? Not really, if only because in 87, as violent as it was, the crash was primarily over in one day. It was like ripping a band-aid off of a cut. Painful, but quick. This time around, it's been more like an endless root canal. Just when you think it may be over, the dentist is back for more.

CS21 Net Net Index Hit HardOur index of 21 companies trading below their net curent asset value has been hit extremely hard this past month. Since inception (2/12/08) through 9/16, the index was up 15%, 2000bps above the Russell Microcap Index. As of Friday, it was down 17.5% since inception. During the same period, the Russell Nicrocap Index is down about 30%, so our little index of misfits is still holding up well in that comparison. Quite a drubbing, though.

But the smallest of the small are being hit extremely hard in this market, and there may be bargains galore. The problem is, no one knows when the panic will subside, and panic knows nothing about assets, book values or cash. Panic only knows panic.

Still, we've seen tremedous pullbacks in some intersting names. Here are a handful that we still own, that look even more interesting at current levels. Please note, none of these are net/nets

PICO Holdings(PICO)Price: $28.99Off 52 week High: 40%

Cresud ADR(CRESY)Price: 6.97Off 52 week High: 73%

JG Boswell(BWEL)Price: $550Off 52 week High: 45%

Premier Exhibitions(PRXI)Price: $1.26Off 52 week High: 91.5%

I don't know if we've hit bottom yet, it "feels" like we are close, but again there are no rational bounds during a panic. There's plenty of cash on the sidelines, though. Ultimately, some of it will find it's way back into the market. In the meantime, be careful.

*The author has a positions in all companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

1 comment:

Anonymous
said...

BWEL -- I've owned it not for the cotton fields but for the water rights. Ridiculous risk reward here. However, what scares me the most, is the threat of eminent domain. If BWEL decides at some point to fallow the fields and sell their water rights to thirsty LA, we may see a political opportunity to vilify Big Ag and steal the water at below market rates. Even so, the water would have to be sold at a ridiculous discount to justify this current stock price. I recommend "The King of California" and "Cadillac Desert" for those of you interested in water as an investment.